Federal panel wants tobacco probe records
AUSTIN – A federal grand jury in Houston is investigating former Attorney General Dan Morales’ hiring of five private lawyers who helped Texas win a $17.3 billion settlement from the tobacco industry.
Morales’ successor, Attorney General John Cornyn, has been subpoenaed to provide the grand jury with records of his own internal investigation of the lawyers’ work and how they were hired.
The Houston Chronicle obtained a copy of the subpoena Thursday under an open records request. Although it was known that FBI agents had begun interviewing potential witnesses several months ago, the subpoena is the first public documentation that the inquiry has advanced to a grand jury.
Cornyn’s office Thursday declined to comment on the subpoena or its own investigation. But Cornyn has questioned Morales’ contingency agreement with the private lawyers, who were awarded $3.3 billion in legal fees to be paid by cigarette makers.
Among the matters Cornyn and the federal grand jury are believed to be investigating are allegations raised almost two years ago by Houston trial attorney Joe Jamail that Morales solicited $1 million from each of several lawyers he considered hiring for the tobacco suit.
A spokesman for the five lawyers declined comment late Thursday. Morales was unavailable. In the past, they have strongly denied any wrongdoing.
The subpoena, dated Jan. 28, directs Cornyn to appear before the grand jury on Feb 23 or, in the alternative, to provide certain documents to the FBI on or before that date.
The subpoena requires Cornyn to produce all documents and other evidence relating to the investigation of Morales, former first assistant Jorge Vega and the five outside lawyers “with regard to the Texas tobacco litigation.”
Those records, the subpoena states, would include any records or other items “which have any relation to the hiring or attempted hiring of outside counsel by the Texas attorney general’s office for the Texas tobacco litigation, and their ensuing relationship both before and during litigation and after settlement.”
The five outside lawyers hired by Morales for the tobacco suit were Walter Umphrey and Wayne Reaud of Beaumont, John O’Quinn and John Eddie Williams Jr. of Houston and Harold Nix of Daingerfleld.
The suit, which sought damages for public health care costs associated with smoking and attacked the tobacco industry for marketing cigarettes to minors, was filed in 1996 when most people considered a victory against the tobacco industry a longshot.
But the industry settled the case in 1998, agreeing to pay the state and county hospital districts approximately $17.3 billion over the next 25 years. The amount, however, will be reduced if cigarette sales fall.
The outside lawyers were awarded their legal fees by national arbitrators in late 1998, shortly before Morales left office. The cigarette companies have agreed to pay the fees over an undetermined number of years.
According to memos prepared by Jamail, the $1 million that Morales allegedly solicited from the attorneys was for a fund to help Morales defend himself against political or public relations attacks from tobacco companies during the litigation.
The payments allegedly were to be in addition to the $2 million that each of the five lawyers agreed to put up for litigation expenses in return for a 15 percent contingency.
Jamail wasn’t hired but was interviewed by Morales for the job.
In a bitter divorce dispute, Williams’ former wife, Dawn Nelson, testified last year that Williams had told her that Morales wanted a $1 million payment.
Nelson said Williams told her about the alleged payment the day Morales hired him and the four other lawyers to sue the cigarette companies.
Both Morales and Michael Tigar, a former University of Texas law professor representing the five lawyers, denied Nelson’s allegation when it was initially published by the Houston Chronicle in November.
In an interview’ in November, Morales said he never solicited money from the lawyers for any personal or political use.
“I can see perhaps where there could be some good-faith confusion or good-faith misrepresentation” about what the expense funds were to be used for, he said.
The federal grand jury in Houston is the second to begin looking into controversies stemming from the tobacco suit. Last year, a federal grand jury in
Austin subpoenaed records dealing with Cornyn’s investigation of a sixth outside lawyer, Marc Murr of Houston.
Cornyn accused Morales and Murr of backdating contracts to try to fraudulently secure $263 million in legal fees for Murr, a longtime Morales friend.
Morales heatedly denied the allegations and said Murr played a critical role in the litigation. But other lawyers said Murr did little work on the case, and Murr withdrew his claim for legal fees.